Fresh off a SPAC deal that brought in $500 million in cash proceeds, Sema4 is putting those earnings to good use, with a buyout bid for genomic testing and analysis company GeneDx.
Currently a wholly owned subsidiary of OPKO Health, GeneDx not only offers genetic sequencing services to patients and healthcare providers, but also adds those findings to its database of clinical exomes and phenotypes to identify novel disease genes and other links between genetics and health conditions.
Combining those testing services and results with Sema4’s own platform—which uses artificial intelligence to analyze 12 million de-identified patient records to build individualized models of human health—will create one of the largest genomic screening providers in the U.S.
Case in point: Once the acquisition closes, Sema4 said it expects to rake in $350 million in pro forma revenue for the year, a huge surge over its 2021 earnings, which are projected to land closer to the $200 million point. The Mount Sinai spinout has also estimated that without the addition of GeneDx’s assets, its standalone revenue for 2022 would clock in between $215 million and $225 million.
Under the proposed terms of the deal, Sema4 will dole out an upfront payment of $150 million in cash, plus 80 million of the company’s shares, for a total upfront offer to OPKO of about $473 million. Tacking on another $150 million that’ll be paid out as GeneDx hits certain revenue-based milestones in the first two years after the buyout, the total value of the transaction adds up to about $623 million.
Some of those funds will come from a $200 million private placement financing that Sema4 has arranged with Pfizer and other institutional investors.
The acquisition has already been unanimously approved by the boards of both companies. Pending other closing requirements and approval by Sema4’s stockholders, both the acquisition and the private placement are slated to close some time in the second quarter of this year.
At that point, Katherine Stueland, currently the president and CEO of GeneDx, will join Sema4 CEO Eric Schadt, Ph.D., at the helm of the combined company. She’ll also join its board of directors, which will appoint Jason Ryan, an executive alum of Foundation Medicine and Magenta Therapeutics, as its executive chair.
“This acquisition gives us the opportunity to accelerate the use of genomics as standard of care by providing a deeper menu of precision medicine solutions to our health system partners to better meet their clinical needs,” Schadt, also the founder of Sema4, said in a statement.
“Adding GeneDx’s comprehensive dataset and capabilities to our offerings enables us to inform on an even broader range of diseases, further closing the gap between the practice of medicine and the availability of more clinically actionable guidance,” he continued. “GeneDx’s operational prowess and market-leading cost structure in exome and genome sequencing will also help accelerate our path to improved gross margins and profitability.”